bond yields. people buy bonds because bonds pay interest. if you buy a general motors bond, GM is obliged to pay you interest during the period of the loan. for ex. an 8% 2025 GM bond in the amount of $1000 states that GM will pay the bondholders $80 interest annually (8% of 1000) until 2025. at that point GM will repay the initial $1000 loan (the "principal") the current yield paid on bond depends on the promised interest rate(8% in this case) and the actual purchase price of the bond. specifically , yield= annual interest payment / price paid for bond if you pay $1000 for the bond, then the current yield is yield= $80/$1000 = 0.08, or 8% which is the same as the interest rate printed on the face of the bond. but what if you pay only $900 for the bond? in this case, the interest rate paid by GM remains at 8% ($80 per year), but the yield jumps to yield= $80/$900 = 0.089, or 8.9% IF THE GM BOND DESCRIBED ABOVE WAS RESOLD FOR $1200, WHAT WOULD THE YIELD BE?